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Chevron: production low, but profits hit the roof October 28, 2011

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Chevron’s profits more than doubled in the third quarter, powered by rising prices for crude oil, eventhough production sliped.

San Ramon-based Chevron earned $7.83 billion, up 108 percent from the $3.77 billion Chevron earned in the year-ago quarter. Revenue jumped 29.6 percent and totaled $64.43 billion in the July-September quarter.

Profits topped Wall Street’s predictions. The company earned $3.92 a share, while a FactSet Research survey of analysts projected $3.47 a share. Revenue, though, fell short of the expectations of $70.4 billion.

Chevron’s shares rose slightly, 0.2 percent, during the first two hours of trading.

The company’s energy production slipped in the quarter. Chevron product 2.6 million barrels a day in the 2011 third quarter, down 5 percent from a year ago.

“We had another successful quarter,” CEO John Watson said.

The company said the trend of rising oil prices bolstered its exploration, development and production operations, also known as the upstream business. Asset sales and improved margins at its refiners boosted its refining, retail and transportation activities, known as the downstream operations.

Profits from the upstream operations totaled $6.2 billion, up 74 percent from the year before. Downstream profits totaled $1.99 billion, more than triple, or a 252 percent increase from the year-ago quarter.

The company’s refinery operations in the U.S. appear to be faring better. U.S. downstream profits doubled and increased 102 percent, totaling $704 million. The company said margins improved for sales of refined products such as gasoline.

Downstream results in the U.S. also benefitted from lower operating expenses, Chevron said. The company has been trimming its staff in locations such as San Ramon, Concord, Richmond and Houston.

In recent days, Exxon Mobil, Royal Dutch Shell and BP reported a surge in quarterly profits even though they’re producing less oil from fields around the world. Although oil companies, including Chevron, are spending billions to develop new oil and natural gas fields, it could take years or even decades before the fields produce energy and revenue.

Chevron said it continues to make strides in its major capital projects, such as those in Australia.

“The Wheatstone and Gorgon liquefied natural gas projects are expected to provide substantial new energy supplies to meet growing demand in the Asia-Pacific region,” Watson said.


Glencore sells naphta, Hin Leong buys gasoil October 19, 2011

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Glencore International AG sold naphtha for a third day in Singapore, Asia’s biggest oil-trading center. Hin Leong Trading Pte paid a higher premium for two gasoil cargoes.

Light Distillates Glencore, the world’s largest commodities trader, sold a 25,000 metric-ton, open-specification naphtha contract for the first half of December, according to a Bloomberg survey of traders monitoring transactions on the Platts window.

The company received $907 a ton from BP Plc. Naphtha’s premium to London-traded Brent crude futures increased 83 cents from yesterday to $67.42 a ton at 6 p.m. Singapore time, based on data compiled by Bloomberg.

This crack spread, a measure of refining profit, widened for the second time in three days.

Middle Distillates Hin Leong bought gasoil, or diesel, with 0.5 percent sulfur for a second day in Singapore, according to the Bloomberg survey. The closely held trader paid 40 cents a barrel over benchmark quotes to ConocoPhillips and BP for 170,000 barrels each.

That’s a higher premium than 10 cents in yesterday’s transactions. Gasoil’s premium to Asian marker Dubai crude fell 91 cents to $15.22 a barrel at 2:31 p.m. Singapore time, based on data from PVM Oil Associates Ltd.

Marathon oil to a record 52 weeks low October 3, 2011

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Marathon Oil traded today at a new 52-week low of $20.83. So far today approximately 7.2 million shares have been exchanged, as compared to an average 30-day volume of 8.5 million shares.

Marathon Oil Corporation, through its subsidiaries, is an integrated oil firm with operations worldwide. The Company explores for and produces and markets liquid hydrocarbons and natural gas on a worldwide basis. Marathon also mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada and refines, markets and transports crude oil and petroleum products.

There is potential upside of 73.5% for shares of Marathon Oil based on a current price of $21.19 and an average consensus analyst price target of $36.76. Marathon Oil shares should first meet resistance at the 50-day moving average (MA) of $26.13 and find additional resistance at the 200-day MA of $41.59.

Marathon Oil share prices have moved between a 52-week high of $54.33 and the current low of $20.83 and are currently at $21.19 per share. Over the last five market days, the 200-day moving average (MA) has gone down 0.7% while the 50-day MA has declined 3.3%.

Gennady Timchenko to control construction giant ARKS September 13, 2011

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Gennady Timchenko’s energy trading company Gunvor recently acquired a stake in construction giant ARKS and bought an option to take control of the company. A new step forward for the Finnish businessman’s diversification strategy.

A month after gaining control of mining company Kolmar Coal (51%) for approximatively $400 million, Gennady Timchenko’s Gunvor, the third independent energy trading company in the world, goes further with ARKS.

The company acquired last week 21% of one of the leading Russian construction company, ARKS, in order to diversify from oil and gas business. The Moscow-based company is notably specializing in building roads and highways in the Moscow region.

According to Russian newspaper Kommersant, Gennady Timchenko bought 21% of the building company for $200 million. Moreover, the businessman received an option to take control within a few months.

Founded in 2003, the ARKS group was formerly known as UM #4, Russian oldest construction company (since 1926). The group has three main affiliates: Create Story (construction), UM #4 (demolition) and Nataland (engineering services).

Since 2010, Gunvor has launched a wide diversification strategy. According to analysts Gunvor’s recent moves are a bid to curb the company’s reliance on oil and gas, which currently represent most of Gunvor’s turnover.

Gunvor founder and co-owner Gennady Timchenko is a Finnish businessman with Russian origins, specializing for decades on Russian oil and infrastructures.

Seneca Resources not giving up Marcellus partnership September 8, 2011

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Natural gas and oil company Seneca Resources Corp. said Thursday that it expects the production rate at its operations in the Marcellus Shale to reach 150 million cubic feet per day by Sept. 30, and 240 million cubic feet per day 12 months later.

Those dates coincide with the end of the National Fuel Gas unit’s fiscal 2011 and 2012.

The Marcellus Shale is rock containing a rich deposit of natural gas that extends through the Appalachian Basin.

“Our production rates will be ramping up substantially in the last quarter of this fiscal year as groups of new wells are brought on line,” said Matthew Cabell, Seneca’s president.

The production rate forecast is the same regardless of whether Seneca is working the Marcellus shale alone or takes on a partner, the company said.

Seneca has been in talks with potential partners in a joint venture to develop the Marcellus Shale, and has received several offers, the company said.

National Fuel Gas Co., an energy company based in Williamsville, N.Y., had anticipated reaching a decision on a partner by the end of last month, but it is still evaluating the offers, said David Smith, National Fuel’s chairman and CEO.

“While discussions are ongoing, as we’ve said in the past, we will only move forward with a transaction on terms that we believe add value to our shareholders over and above the value that Seneca will likely achieve through its currently planned operations,” he said.

Shares of National Fuel Gas Co. ended the regular session down $1.20 at $69.62.

$12 billion shale gas deal for BHP Billiton August 26, 2011

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BHP Billiton has made another big bet on energy in the US, announcing an agreement to buy Petrohawk, an independent oil and gas company, for $12.1bn in cash.

In its biggest acquisition to date, the Anglo-Australian mining group said on Thursday it had agreed to pay $38.75 a share for Petrohawk, which operates in three leading areas of shale gas and oil production in the US. The deal values Petrohawk at $15.1bn including net debt.

Marius Kloppers, BHP chief executive, said the acquisition would be earnings accretive in its first full year of consolidation as he defended the 65 per cent premium the miner had agreed pay for Houston-based Petrohawk shares compared to their Thursday closing level.

“Petrohawk is attractive to us because it is in the large, liquid North American market where you can sell the gas,” Mr Kloppers said. “When making an acquisition, particularly one like this, the majority of the value is paid for the resources in the ground.”

BHP boosted its energy business in February with a deal to buy Chesapeake Energy’s Arkansas-based gas business for $4.75bn – its first acquisition since last year’s failed $39bn attempt to buy PotashCorp of Canada. That deal represented the group’s first venture into US shale, giving the company 87,000 acres of leasehold gas properties.

Exxon Mobil, Chevron, BP, Total and Statoil have also bought US shale assets in recent years. The sector has boomed because the gas is considered a better alternative to coal for power generation due to its lower carbon dioxide emissions

The gas, trapped thousands of feet underground, is released by opening up the shale rock with a process known as hydraulic fracturing, or “fracking”, in which thousands of tonnes of water, sand and other additives are pumped underground under high pressure.

BHP said on Thursday that the Petrohawk deal would more than double its petroleum division’s resource base and increase proved reserves by 30 per cent.

With the acquisitions of Chesapeake and Petrohawk, the company will have more than tripled its resource base from 3.7bn barrels of oil equivalent to 11bn boe within the last year.

It forecast its energy business would expand to a 1m boe per day business within five years, compared to less than 500,000 boe per day in the 2010-11 financial year.

Petrohawk had been undervalued relative to peers, people familiar with the deal said, as the company faced capital constraints in developing its large portfolio of assets. The price on offer from BHP reflects about 7.5 times forecast earnings before interest, tax, depreciation and amortisation in 2012, in line with where other companies in the sector trade, they added.

Petrohawk, in contrast, has recently traded closer to 4.5 to 5 times forecast ebitda.

Petrohawk operates in the Eagle Ford and Haynesville shales in Texas and Louisiana as well as owning substantial acreage in the Permian Basin, an oil-rich shale in Texas.

Its assets cover about 1m acres and are expected to produce about 158,000 boe per day in 2011. At the end of last year the company, which was founded by energy entrepreneur Floyd Wilson in 2003, reported proved reserves of 3,400bn cubic feet of natural gas equivalent.

Barclays Capital and Scotia Waterous advised BHP on the deal. Goldman Sachs advised Petrohawk.

The offer will be financed from BHP’s cash balances and a new credit facility.

Just as BHP bought Athabasca Potash in Saskatchewan, Canada for under $1bn a few months before launching a $39bn bid for PotashCorp, its acquisition of the Fayetteville shale gas assets this year was a precursor to a much larger play in an alternative commodity class.

Like potash, the market for shale gas follows different economic cycles to iron ore, copper, and coal, BHP’s principal commodities. BHP’s strategy is to buffer itself against the price volatility inherent in all commodities by positioning itself in top-tier assets across the commodities spectrum.

The Petrohawk deal comes as investors scrutinise the company’s use of cash. BHP last month completed a $10bn share buy-back programme and is pumping money in to the expansion of its iron ore mining complex in Australia.

But the highly cash generative company, which analysts believe could slip into a net cash position this month, has failed to deploy capital on large-scale mergers and acquisitions in the past year.

ENI invests in Venezuelan oil August 14, 2011

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Italian energy company Eni said it would contribute as much as $1.5 billion to a state energy company to develop the Junin 5 block off the coast of Venezuela.

Eni Chief Executive Officer Paul Scaroni met in Caracas with Venezuela’s Energy Minister Rafael Ramirez, also president of state oil company Petroleos de Venezuela SA to discuss projects in the Orinoco belt.

Eni signed deal in Venezuelan to exploit the Junin 5 oil block in the Orinoco oil belt in the Caribbean Sea last year.

Eni had said it hopes to produce around 75,000 barrels of oil per day from the site during early production phases set for 2013. Long-term production, the company said, could reach 240,000 bpd in 2018.

Eni in a statement Friday said the “primary topic of discussion” was developing Junin 5. The company said the reserve holds 35 billion barrels of certified oil in place.

Eni in its statement said it agreed to provide up to $1.5 billion to help PDVSA develop its share of the production phase of Junin 5.

ConocoPhillips will split refining and exploration/production August 2, 2011

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ConocoPhillips, the $226 billion Houston-based oil giant, yesterday said that it will spin off its refining and marketing operation, in a move aimed at creating more value as two separate publicly-traded companies.

The announcement sent the stock pf the third largest oil firm in the US up by 6.43 per cent to $79.18 in morning trading on the New York Stock Exchange. ConocoPhillips plans to separate its oil refining and marketing business from its exploration and production operations.

The split would create two publicly-traded companies, one focused on finding and extracting oil and gas around the world, and the other on converting the crude into refined products such as gasoline that could be sold to consumers.

It is the first oil major to shift from the decades-old industry strategy of consolidating production and refining, though in May 2011 the much smaller Marathon Oil decided to spin off its refining business by forming Marathon Petroleum Corp, a stand-alone company.

ConocoPhillips will become the largest refining company in the US based on capacity and the largest exploration and production company based on oil and gas reserves

NYSE: Marathon Petroleum Group enters the big league July 4, 2011

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Marathon Petroleum Corp. has debuted on the New York Stock Exchange as the second- largest U.S. independent oil refiner after surging gasoline prices drove a year long rise in refining stocks.

Marathon Petroleum is being spun off from parent Marathon Oil Corp. (MRO) amid growing investor demand for companies that can capitalize on gasoline prices that rose at twice the rate of crude oil in the past 12 months, said Sam Margolin, an analyst at Dahlman Rose & Co.

The refiner is valued at $14.7 billion in unofficial trading permitted by exchanges to help investors gauge demand, on par with the largest independent refiner, Valero Energy Corp., which has twice the fuel-making capacity. Marathon Petroleum is poised to capture higher margins thanks to upgrades at plants that account for half the company’s oil processing, said Jacques Rousseau, an analyst at RBC Capital Markets LLC.

“It’s seen as a new name in a group of companies that have run up aggressively in the past year, and people think it’s an opportunity to buy a stock that doesn’t have a chart showing a year’s worth of massive gains behind it,” said Margolin in a telephone interview from New York.

Marathon Oil Chief Executive Officer Clarence Cazalot in January revived a plan to split off the refining division after years of frustration that the fuel-producing unit was a drag on the value of the company’s more profitable crude and natural-gas business. Cazalot, a former exploration chief at Texaco Inc., canceled the original spinoff in February 2009 after the global financial collapse deflated equity markets.

Asset Sales

Since then, Marathon Oil has sold off $1.9 billion in refining, storage, pipeline and retail assets, including a plant in Minnesota, and hundreds of convenience stores. The margins earned in the U.S. from processing crude into fuels during that time almost tripled as the recession ended and energy demand rebounded.

Since assuming the top job at Marathon Oil when it was spun off by U.S. Steel Corp. in 2002, Cazalot, 60, has quadrupled net income and expanded the company’s search for oil and gas to Iraq, Indonesia and Poland. On June 1, the company agreed to pay $3.5 billion to Hilcorp Resources Holdings LP for Texas leases that may add the equivalent of 100 million barrels of crude to its reserves by the end of this year.

As a result of the transaction, Cazalot raised his production-growth estimate through 2016 to 5 percent to 7 percent a year from a previous forecast of 3 percent to 5 percent.

Shares Lag

Marathon Oil posted share price gains averaging 7 percent for the past five years, lagging Los Angeles-based Occidental Petroleum Corp. and Anadarko Petroleum Corp. of The Woodlands, Texas, which rose 17 percent and 10 percent a year, respectively. Neither Occidental nor Anadarko engage in refining.

Marathon Petroleum’s margins probably will widen starting in late 2012 after the completion of a $2.2 billion upgrade to the company’s Detroit refinery that will boost its ability to process cheaper crude, RBC’s Rousseau said in a telephone interview.

The Detroit project will increase the refinery’s capacity to handle heavy crude from Canada’s oil sands to 100,000 barrels a day from 20,000 barrels, Rousseau said. Heavy Canadian crude sells for 20 percent to 30 percent less than the lighter types of oil from the Gulf Coast that the Detroit refinery currently primarily runs, he said.

Rousseau, who has an outperform rating on Marathon Petroleum, estimates the Detroit upgrade will add $1 to Marathon Petroleum’s annual per-share earnings. He expects the shares to reach $50 within a year.

“There’s a lot to like with this story,” Rousseau said.

Refining Consolidation

As a stand-alone refiner, Marathon Petroleum will have more volatile earnings than its parent because retail fuel markets tend to fluctuate seasonally, said Ted Harper, an asset manager at Frost Investment Advisors in Houston, who helps manage about $6.8 billion. Frost Investment is a subsidiary of Cullen/Frost Bankers Inc. which held 23,797 Marathon shares as of a March 31 filing.

“They may need to smooth out their earnings stream,” Harper said. Marathon should expand its refining base through acquisitions, or add to its logistics business, which includes the largest U.S. barge fleet, he said.

The U.S. refining industry has consolidated in the past six years as fuel makers, faced with soaring crude costs, cut operating expenses and shed their least-efficient plants. The transactions have included Valero’s 2005 acquisition of Premcor Inc., Western Refining Inc.’s purchase of Giant Industries Inc. in 2007, and Holly Corp.’s planned merger with Frontier Oil Corp., which is expected to close tomorrow.

Texas City

Marathon Petroleum may seek to buy BP Plc’s Texas City refinery near Houston, the biggest U.S. plant ever to be sold as a single asset, said Neil Earnest, practice leader of merger’s and acquisitions at Muse, Stancil & Co., a consulting firm in Dallas.

BP’s Texas City refinery is the third-largest in the U.S. by virtue of 475,000 barrels of daily crude-processing capacity, according to Bloomberg data. The plant is larger than anything in Marathon’s refining portfolio and would provide the ability to export diesel to South America, Earnest said.

BP will have to lower its $2.9 billion asking price for the Texas City refinery before Marathon Petroleum could afford it, said Mark Sadeghian, senior director of energy at Fitch Ratings in Chicago.

Marathon Petroleum will trade under the symbol MPC on the New York Stock Exchange.

Repsol and Alliance form a Russian joint venture June 18, 2011

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How will the $800M joint venture work? Repsol will contribute cash to support growth of the joint venture and Alliance Oil will contribute producing oil assets in the Russian Federation.

Repsol and Alliance Oil Company have signed a Memorandum of Understanding to form a joint venture that will serve as a growth platform for both companies in the Russian Federation, the world’s largest oil and gas producer.

Alliance Oil will hold a 51% stake in the joint venture and contribute producing assets in the Volga-Urals Region while Repsol will own the remaining 49% and make an initial cash investment to finance future growth opportunities.

The agreement seeks to combine Alliance Oil’s knowledge and privileged access to Russian exploration and production business opportunities with Repsol’s know-how and technical capabilities to create a long-term exploration and production alliance.

In addition to the exploitation of the assets to be contributed by Alliance Oil, the agreement includes seeking opportunities for exploration and growth through producing assets in the Russian Federation.

‘This cooperation with Alliance Oil enables Repsol to increase its producing assets and obtain privileged access to assets in the country, home to some of the largest hydrocarbon resources in the world, reinforcing this growth vector of our group”, said Repsol Executive Chairman, Antonio Brufau.

‘We are pleased to develop our partnership with Repsol and together create an additional important strategic upstream growth platform in Russia. I am convinced that the joint venture will create significant value for our shareholders and make a meaningful contribution to our reserves and production,’ said Eric Forss, Chairman of Alliance Oil Company ltd.

Repsol already owns a 3.47% stake in Alliance Oil resulting from the merger between Alliance Oil and West Siberian Resources in 2008. Repsol also owns a 74.9% stake in Eurotek-Yugra, which holds exploration and production licenses in the Karabashsky-1 and -2 blocks in the prolific West-Siberia basin.

The transaction is subject to negotiation of final contractual terms, due diligence of the assets to be contributed by Alliance Oil and the procurement of the relevant regulatory and corporate approvals, which is expected to be completed during 2011.